Authored by Satish Dondapati, Fund Manager at Kotak Mutual Fund: Silver is increasingly capturing investors’ attention as a compelling alternative to gold. Several factors are driving a surge in inflows
into silver funds, such as Silver ETFs and Silver Fund of Funds (FOF), offering easy access to silver without the challenges of physical ownership. This surge is fuelled by silver’s unique combination of rising industrial demand, safe-haven appeal amid geopolitical tensions, and its role as a hedge against inflation.
In 2025, silver prices have reached a 13-year high, driven primarily by robust industrial demand and ongoing supply constraints. Silver’s industrial importance cannot be overstated—it is crucial in solar panels, electric vehicle batteries, wiring, sensors, and emerging technologies like AI and data canters. Over half of global silver demand now comes from industry, a trend likely to strengthen with the acceleration of green energy and technology adoption.
Supply-side challenges add to silver’s bullish outlook. The market faces its fifth consecutive year of a supply deficit, with demand outstripping supply by approximately 149 million ounces. Recycling efforts have plateaued due to costs and technical difficulties, while declining ore quality and geopolitical tensions further strain silver supply chains, particularly in major producing countries like Mexico and China.
Another important indicator is the gold-silver ratio, which has fallen from over 100 to about 89. Historically, this ratio averages near 60, suggesting that silver remains undervalued relative to gold. If this ratio narrows, silver prices could rise significantly, potentially reaching $42 to $48 per ounce, still below its 2011 peak of $50.
While silver offers exciting opportunities, investors must remain mindful of its volatility, sensitivity to interest rates, and economic shifts, given its industrial links. A diversified, long-term approach can help manage these risks.
In summary, silver’s dual identity as both a precious and industrial metal, combined with ongoing supply challenges and geopolitical uncertainty, positions it as a strong contender to become the “next gold” in the evolving investment landscape.
Authored by Satish Dondapati, Fund Manager at Kotak Mutual Fund
The views expressed in this article are those of the author and do not represent the stand of this publication.
